Identifying and solving key aspects of global payments friction via the 2022 Global Payment Survey
What Price are you Paying for Comfort and Security in your Payments Process?
Comfort and Security. Who doesn’t have those two anchors in their mind when thinking about their businesses payments…
Comfort and Security
Who doesn’t have those two anchors in their mind when thinking about their business’s payments systems? If you don’t, there will surely be a stakeholder or two that will. It’s not surprising, though. The money flow ecosystems you set up are dealing with the raison d’etre of the whole operation: the money. Chances are that you’re still dealing with the traditional banking networks for most of your money movement. But there are costs involved with this, costs that are affecting your business at many different levels.
Is it all worth it? Well, if you haven’t thought much about that question, it might be just the right time to start. Because, there are new fintech solutions that offer money movement and compliance that meets or exceeds those services in the traditional system, all while providing the same level of security and compliance, with an added benefit of a rapidly evolving user experience.
Peace and serenity through staying the course
The choice between keeping the status quo and changing paths is a constant battle. Status quo bias is real and it can be strong in the heads of decision-makers, permeating institutions and keeping things running as-is. To not act is the comfortable and safe move… or is it?
Perhaps there are risks involved in changing parts of processes, any business process. But if you’re thinking about digital transformation at all, you’re going to need to think about simplifying and automating aspects of business that have become complacent.
This is important to remember because change isn’t waiting for anyone when it comes to fintech solutions.
IT-level and regulatory Security
There is also a very real and “tangible” aspect to security that is paramount to those involved in setting up and maintaining payments infrastructure as well as those that deal with the policies that govern it. This comes in the form of the IT-level security protocols and data compliance regulations and benchmarks that mesh to provide standards across the globe.
Here we are talking about:
- Payments Card Industry Data Standard (PCI)
- General Data Protection Regulation (GDPR)
- Sarbanes-Oxley Act (SOX)
- SOC 1 & 2 & 3 Reports
- Two-Step Authentication
- Data encryption
To name but a few…
On the surface, this looks like sticking with the traditional model of payments is a good way to go. Since the networks are long-standing, they must have all these boxes checked. Generally, they do, on their side. But a lot of these regulations extend beyond that network, falling squarely on the organization to comply. And there is much more to comply with than meets the eye. The administrative burden can be immense.
Have you thought about a payments solution that provides automated data gathering for compliance purposes? With the data considerations covered, simplifying operations-heavy processes is a good step towards reducing time-based burdens that end up hurting your cash flow.
The hidden and not-so-hidden costs
Beyond the administrative aspects. When it comes to payments, staying still and “safe” in the legacy networks comes with short- and long-terms costs. Depending on which business problems you “own” the true effect of these costs can be anything but straightforward. But in a nutshell, these costs can be broken down into two distinct categories: actual monetary costs, and opportunity costs.
Actual monetary costs
In traditional payments systems, the real, tangible costs of transactions can vary, as there are many factors that determine the aggregate fees per transaction made through the traditional networks. Domestic or cross-border? Automated Clearing House or wire transfer? Credit card processing? Paper checks? These all combine to form a complex matrix of fees that, when added together, bleed funds from a bottom line. But for many, this is merely the cost of doing business through the trusted, time-honored, traditional payments methods.
But is this cost too high? To determine that, we’d first have to determine if what you receive as a service is indeed unique and if the benefits provide a positive ROI.
In reality, the providers of new fintech payments solutions are fully capable of delivering comprehensive IT-level security. And solutions that incorporate technology such as intelligent digital wallets can provide near-instant money movement at a fraction of the cost.
In light of the new solutions available, disruption is happening. And there are consequences to this. Whether they’re positive, or if they’ll come back to haunt you, that will depend on the actions you take to keep up with them.
This disruption is providing payments ecosystems that give users a better experience on a more agile platform, faster, and with far fewer fees. As more and more users become accustomed to the flexibility these solutions (such as independent payment platforms) provide, their standards are raised. From that point on they will seek to use those products that provide them. Those businesses who take heed and seek out the technology that enables them to provide these services in the most efficient way will stand the best chance of keeping their customers happy in terms of the payment experience.
Where does that leave those who give in to staying with the status quo, keeping their entire payments process in the legacy processes? It definitely doesn’t do them any favors in terms of the types of experience they can offer their own customers or their customers’ customers. In the long run, that can really hurt a bottom line.
Solutions to problems not yet known
Could this really be the case?
“The price of inaction is far greater than the cost of making a mistake.” – Meister Eckhart
The cost of “comfort and security” in the legacy systems can already be felt now. And it will be felt even more so in the future. Fees are chipping away at the money moved, and the risk of not keeping up with desired experience and evolved offerings can be crippling.
What’s more, it’s not as if the traditional networks are content themselves to stick to the status quo. They’re seeing the changes happen, and they’re trying their best to keep up. But despite their vigor, the same morass of regulations and compliance that these networks rely on to keep things in check, also create massive roadblocks to advancement.
Fintech solutions don’t have that problem. They can iterate and bring out new features and services as fast as their development cycle can produce them.
These roadblocks ensure that anyone basing their business model on the traditional systems are also beholden to their slow progress. In a new and wide-open world of payments innovation, the only constant is change. It makes good business sense to keep up. The costs of inaction are just too high, especially when there are demonstrably faster and cheaper ways to handle money movement for your organization.